Potter: No Postal Crisis Yet

WASHINGTON -- The U.S. Postal Service is doing so well managing its costs and keeping service at record levels that it's not in a crisis right now. This creates a problem when it comes to postal reform legislation, postmaster general John E. Potter told attendees yesterday at the Direct Marketing Association's Government Affairs Conference.

But a big reason for the positive trends, he said, involves legislative change.

"You all know that adjustments made to our payments for Civil Service retirement has helped us to the tune of about $3.2 billion a year," he said. "It is extremely imperative that we finalize that legislation."

Last year's Civil Service Retirement System legislation still has two open issues. One involves requiring the postal service to put CSRS savings into escrow pending congressional review beginning in fiscal year 2006. Potter said the USPS has prepared a report for Congress explaining what it would do with the funds.

"I think it's time now for [Congress] to just deal with this escrow and eliminate it," he said. "It takes a lot of uncertainty out of the future for us when it comes to what we might have to do from a rate perspective."

Without the $3 billion, Potter said, rates likely would increase 5.4 percent on top of the amount needed to cover increased costs.

The other open piece of the legislation involves last year's shift from the Treasury Department to the postal service of military service retirement liability costs of USPS employees before they became postal employees. The USPS has said this will add more than $27 billion to its obligations.

"The postal service has gone on the record that that obligation should be borne by the federal government," Potter said. "It should be borne by the taxpayer, not the ratepayer."

As for postal reform, Potter said the USPS' priorities include more flexible pricing; the flexibility to change infrastructure; and to change collective bargaining so that everything is on the table in its negotiation with its workforce.

Potter said he expects a House bill and a Senate bill in short order, "but we are in a tough legislative year -- this is an election year, there is a war going on [and] there are other priorities on Capitol Hill. We are not ignorant of that."

Because of the diversion of First-Class mail to e-mail, "we need the flexibility to manage this organization so we can continue to deliver for all those people who depend on the postal service to get their mail," he said. First-Class mail volume declined 3 percent last year, or 3 billion pieces of mail. This translates into losing $1 billion, Potter said. First Class is the USPS' most profitable category of mail.

"We are doing everything we can to offset that through efficiency and grow that product, and grow other products as well," he said.

In a Q-and-A afterward, Potter addressed a USPS proposal published recently in the Federal Register seeking to clarify when mail containing personal information may be eligible for Standard mail rather than First-Class rates.

"I think people have a lot of notions that we are trying to figure out a way to raise revenue by somehow changing our regulations to force people to mail advertising when it's truly First Class," he said. "Our goal is to create a clear, bright line between what's First Class and what's Standard mail. There is no secret agenda."

The issue is about equality, he said.

"If some people do it and others don't, then we are allowing unequal treatment in the marketplace," he said. "I've been told that there's been varying interpretations of our regulations around the country -- and if the goal is to be equitable, the way we are going to resolve that is by bringing everything to Washington to be reviewed on this issue so that there is one group that looks at it and that there's one standard, not multiple standards around the country."

On the international front, Potter said the postal service is working "to get relief from the current law that requires us to use domestic carriers that carry mail overseas at rates that are dictated to us by the Department of Transportation. Those rates, we believe, are anywhere from three to five times the market rate that we would pay using others, and it has a tremendous impact on our costs."

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